Picture this: you’re sipping coffee, scrolling through your phone, and a headline stops you cold—15 million people in the UK might not have enough to live on in retirement. That’s not just a statistic; it’s a wake-up call. I’ve always believed that planning for the future shouldn’t feel like a chore, but with numbers like these, it’s hard to ignore the urgency. Rising costs, stagnant savings, and a pension system that’s creaking under pressure are leaving millions at risk of retirement poverty. So, what can you do to make sure you’re not one of them?
The Growing Threat of Retirement Poverty
The reality is stark: nearly two-fifths of UK adults aren’t saving enough to afford even a basic lifestyle in retirement. According to recent research, 15 million people are on track for financial hardship when they stop working, a jump of 1.6 million from just a year ago. Why? The cost of living has skyrocketed, squeezing budgets and making it harder to set aside money for the future. But here’s the kicker—pension savings have actually gone up slightly, with average projected retirement income rising from £15,500 to £17,200. So, why isn’t that enough?
The problem lies in the gap between what people are saving and what they’ll need. Inflation has driven up the cost of a comfortable retirement, and for many, the numbers just don’t add up. I’ve often wondered if we’re too focused on the present—bills, groceries, maybe a holiday—to think decades ahead. But ignoring this now could mean a future where you’re scraping by. Let’s break down who’s at risk and what you can do about it.
Who’s Most Vulnerable?
Not everyone faces the same risks when it comes to retirement savings. Certain groups are falling through the cracks, and understanding where you stand is the first step to taking control.
- Gen Z and Young Savers: If you’re in your 20s, retirement probably feels like a lifetime away. A quarter of young people prioritize emergency savings over pensions, and many are focused on saving for a house or a dream vacation. But here’s the catch—42% of those in their 20s are at risk of poverty in retirement, and 13% aren’t saving anything at all.
- Low to Middle-Income Earners: If you’re earning £20,000 to £35,000 a year, you’re likely stuck at the default 8% pension contribution rate. That’s not enough to avoid a massive income drop—up to 60%—when you retire. For many, it’s a struggle to contribute more when living costs are so high.
- Self-Employed Workers: Without access to auto-enrolment, self-employed individuals face a tough road. Over half are at risk of not covering basic needs in retirement, and 23% aren’t saving a penny.
The pension system is a ticking timebomb. Without bold changes, millions will face a future where they’re forced to work into their 80s just to survive.
– Pension consultancy expert
These stats hit hard, don’t they? I’ve always thought the self-employed get a raw deal—no automatic pension schemes, no employer contributions. It’s no wonder so many are struggling. But even if you’re in one of these groups, there are ways to turn things around.
How Much Do You Actually Need?
Let’s talk numbers. The cost of retirement has climbed steeply, thanks to inflation. According to industry estimates, a single person needs £43,100 a year for a comfortable retirement, while a couple needs £59,000. A moderate lifestyle? That’s £31,300 for one or £43,100 for two. Even a basic retirement—one without a car or foreign holidays—costs £14,400 for a single person or £22,400 for a couple.
These figures assume you’ve paid off your mortgage or aren’t renting. If you’re still paying for housing, the costs are even higher. To give you a sense of the savings required, a 65-year-old looking to buy an annuity for that £43,100 comfortable retirement income would need a pension pot of roughly £545,000. That’s a daunting number, right? It’s no surprise so many feel overwhelmed.
| Retirement Lifestyle | Single Person (Annual) | Couple (Annual) |
| Basic | £14,400 | £22,400 |
| Moderate | £31,300 | £43,100 |
| Comfortable | £43,100 | £59,000 |
Here’s something to keep in mind: the state pension can help, but it’s not a silver bullet. Currently, the full state pension pays just under £12,000 a year. That’s not even enough for a basic lifestyle for a single person. Plus, there’s no guarantee the government’s triple lock policy—uprating the pension by inflation, earnings, or 2.5%—will stick around forever. It’s a reminder that relying solely on the state isn’t a plan; it’s a gamble.
Steps to Boost Your Pension
Feeling a bit uneasy? Don’t worry—there are practical steps you can take to build a stronger retirement fund. I’ve always believed that small changes, made consistently, can make a huge difference. Here’s how to get started.
1. Increase Your Contributions
If you can afford it, bumping up your pension contributions is one of the most effective ways to secure your future. Experts suggest aiming for 12-15% of your salary, including your employer’s contributions and tax relief. One clever way to do this is through salary sacrifice, where you give up part of your salary for extra pension contributions. This reduces your taxable income, saving you money on tax and National Insurance.
For example, a middle earner on £35,000 could save £140 a year in tax by increasing contributions by 2%. Over 40 years, that could mean an extra £22,933 in your pension pot, assuming a 5% annual return. Not bad for a small tweak, right?
2. Start Early for Compound Returns
If you’re young, time is your biggest asset. The power of compound returns means that even small contributions can grow significantly over decades. For example, saving £100 a month at age 25 could grow to over £200,000 by 65, assuming a 5% annual return. Wait until 35, and that same £100 a month might only reach £100,000. The earlier you start, the less you’ll need to save overall.
Starting small but starting early is the secret to a secure retirement. Time is the magic ingredient.
– Financial planner
3. Adjust Your Investment Risk
If you’re in your 20s or 30s, you might be in a low or medium-risk pension fund by default. But with a long investment horizon, you could consider switching to a higher-risk fund with more exposure to equities. These funds are volatile, sure, but they tend to offer higher returns over time. As you get closer to retirement, your provider will typically shift you to safer investments to protect your savings.
I’ve always found it fascinating how much difference a slightly higher return can make over 30 years. Just a 1% increase in annual returns could add tens of thousands to your pot. It’s worth checking what fund you’re in and whether it matches your goals.
4. Track Down Lost Pensions
Have you ever changed jobs and forgotten about a pension pot? You’re not alone. Billions of pounds sit in unclaimed pensions across the UK. Tracking down these pots and consolidating them into one plan can make it easier to manage your savings and potentially reduce fees. It’s like finding money you didn’t know you had!
Why the System Needs to Change
While individual actions are crucial, the bigger picture can’t be ignored. The UK’s pension system has some serious flaws. For one, auto-enrolment doesn’t cover the self-employed, leaving millions without a safety net. Contribution rates are also too low—8% isn’t enough for most people to retire comfortably. And then there’s the issue of housing costs, which eat into retirement budgets for those still renting or paying mortgages.
Experts are calling for urgent reforms, like expanding auto-enrolment, increasing minimum contribution rates, and addressing the savings gap for self-employed workers. I can’t help but think we’re at a crossroads—either we fix this now, or we’re looking at a future where retirement is a luxury, not a right.
Taking Control of Your Future
Retirement poverty is a scary prospect, but it’s not inevitable. By taking small, deliberate steps today, you can build a future where you’re not just surviving but thriving. I’ve always believed that financial independence starts with knowledge and action. So, check your pension contributions, explore salary sacrifice, and don’t be afraid to take a slightly riskier investment approach if you’ve got time on your side.
Perhaps the most important thing is to start somewhere. Even if it’s just £10 a month, that’s a step toward security. What’s your next move?
Retirement might feel far off, but the choices you make today will shape your tomorrow. With 15 million people at risk, the time to act is now. So, grab a coffee, pull up your pension statement, and let’s make sure you’re one of the ones who beats Mandgt; the odds.
